Entity information:
Income Taxes

Liberty Global files its primary income tax return in the U.K. Its subsidiaries file income tax returns in the U.S., the U.K.and a number of other European jurisdictions. The income taxes of Liberty Global and its subsidiaries are presented on a separate return basis for each tax-paying entity or group.

The components of our earnings (loss) before income taxes are as follows:
 
Year ended December 31,
 
2017
 
2016
 
2015
 
in millions
 
 
 
 
 
 
U.K.
$
(991.3
)
 
$
1,165.4

 
$
780.4

U.S.
(842.5
)
 
(873.0
)
 
(929.7
)
Belgium
140.0

—

13.7

—

175.4

Switzerland
111.6

 
273.9

 
395.3

Germany
31.3

 
(49.3
)
 
(5.1
)
The Netherlands
(26.1
)
—

169.6

—

(1,260.3
)
Other
21.0

 
(52.8
)
 
67.1

Total
$
(1,556.0
)
 
$
647.5

 
$
(776.9
)

Income tax benefit (expense) consists of:
 
Current
 
Deferred
 
Total
 
in millions
Year ended December 31, 2017:
 
 
 
 
 
The Netherlands
$
(16.2
)
 
$
(118.2
)
 
$
(134.4
)
U.K.
(3.3
)
 
(64.7
)
 
(68.0
)
Germany
(78.6
)
 
19.7

 
(58.9
)
Belgium
(203.6
)
 
145.4

 
(58.2
)
U.S. (a)
47.2

 
(32.8
)
 
14.4

Switzerland
(2.0
)
 
15.6

 
13.6

Other
(21.1
)
 
3.1

 
(18.0
)
Total
$
(277.6
)
 
$
(31.9
)
 
$
(309.5
)
 
 
 
 
 
 
Year ended December 31, 2016:
 
 
 
 
 
The Netherlands
$
(0.3
)
 
$
1,259.6

 
$
1,259.3

U.S. (a)
146.8

 
90.2

 
237.0

Belgium
(105.0
)
 
57.0

 
(48.0
)
Switzerland
(48.4
)
 
5.3

 
(43.1
)
Germany
(77.9
)
 
41.0

 
(36.9
)
U.K
(12.3
)
 
1.2

 
(11.1
)
Other
(20.9
)
 
10.7

 
(10.2
)
Total
$
(118.0
)
 
$
1,465.0

 
$
1,347.0

 
 
 
 
 
 
Year ended December 31, 2015:
 
 
 
 
 
U.K.
$
(0.9
)
 
$
(209.0
)
 
$
(209.9
)
The Netherlands
2.5

 
159.0

 
161.5

Belgium
(125.4
)
 
11.1

 
(114.3
)
Switzerland
(63.2
)
 
(14.7
)
 
(77.9
)
Germany
(66.7
)
 
24.3

 
(42.4
)
U.S. (a)
(79.4
)
 
54.1

 
(25.3
)
Other
(22.7
)
 
6.7

 
(16.0
)
Total
$
(355.8
)
 
$
31.5

 
$
(324.3
)
_______________

(a)
Includes federal and state income taxes. Our U.S. state income taxes were not material during any of the years presented.



Income tax benefit (expense) attributable to our earnings (loss) before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:
 
Year ended December 31,
 
2017
 
2016
 
2015
 
in millions
 
 
 
 
 
 
Computed “expected” tax benefit (expense) (a)
$
299.5

 
$
(129.5
)
 
$
157.3

Change in valuation allowances (b):
 
 
 
 
 
Expense
(365.8
)
 
(272.0
)
 
(493.5
)
Benefit
26.1

 
1,100.7

 
6.9

Non-deductible or non-taxable foreign currency exchange results (b):
 
 
 
 
 
Expense
(247.9
)
 
(33.1
)
 
(4.0
)
Benefit
12.6

 
227.4

 
53.2

International rate differences (b) (c):
 
 
 
 
 
Benefit
125.8

 
132.1

 
192.6

Expense
(35.7
)
 
(19.8
)
 
(45.6
)
Non-deductible or non-taxable interest and other expenses (b):
 
 
 
 
 
Expense
(121.7
)
 
(95.2
)
 
(100.8
)
Benefit
35.3

 
51.5

 
48.1

Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b):
 
 
 
 
 
Expense
(116.6
)
 
(79.2
)
 
(90.8
)
Benefit
35.5

 
172.7

 
0.9

Recognition of previously unrecognized tax benefits
13.2

 
210.9

 
44.4

Tax benefit associated with technologies innovation
12.1

 
72.6

 
21.0

Enacted tax law and rate changes (d)
10.9

 
(157.7
)
 
(282.0
)
Tax effect of intercompany financing
2.4

 
161.6

 
154.9

Other, net
4.8

 
4.0

 
13.1

Total income tax benefit (expense)
$
(309.5
)
 
$
1,347.0

 
$
(324.3
)
_______________

(a)
The statutory or “expected” tax rates are the U.K. rates of 19.25% for 2017, 20.00% for 2016 and 20.25% for 2015. The 2017 statutory rate represents the blended rate that was in effect for the year ended December 31, 2017 based on the 20.0% statutory rate that was in effect for the first quarter of 2017 and the 19.0% statutory rate that was in effect for the remainder of 2017. The statutory rate for the 2015 periods represents the blended rate that was in effect for the year ended December 31, 2015 based on the 21.0% statutory rate that was in effect for the first quarter of 2015 and the 20.0% statutory rate that is in effect for the remainder of 2015.

(b)
Country jurisdictions giving rise to income tax benefits are grouped together and shown separately from country jurisdictions giving rise to income tax expenses.

(c)
Amounts reflect adjustments (either a benefit or expense) to the “expected” tax benefit (expense) for statutory rates in jurisdictions in which we operate outside of the U.K.

(d)
On December 25, 2017, a Belgian corporate income tax rate reduction was signed into law. The statutory tax rate will decrease from the current rate of 33.9% to 29.58% for years 2018 and 2019 and to 25.0% in 2020. On December 22, 2017, the U.S. corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. Substantially all of the impacts of both the Belgian and U.S. tax rate changes on our deferred tax balances were recorded during the fourth quarter of 2017. During 2015, the U.K. enacted legislation that provided for reductions in the corporate income tax rate from 20.0% to 19.0%
in April 2017and from 19.0% to 18.0% in April 2020. Substantially all of the impacts of these rate changes on our deferred tax balances were recorded in the fourth quarter of 2015 when the change in law was enacted. During the third quarter of 2016, the U.K. enacted legislation that will further reduce the corporate income tax rate in April 2020 from 18.0% to 17.0%. Substantially all of the impact of this rate change on our deferred tax balances was recorded during the third quarter of 2016.

The components of our deferred tax assets are as follows: 
 
December 31,
 
2017
 
2016
 
in millions
 
 
 
 
Deferred tax assets
$
3,157.2

 
$
2,826.4

Deferred tax liabilities (a)
(643.2
)
 
(669.9
)
Net deferred tax asset
$
2,514.0

 
$
2,156.5

_______________ 

(a)
Our deferred tax liabilities are included in other long-term liabilities in our consolidated balance sheets.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: 
 
December 31,
 
2017
 
2016
 
in millions
Deferred tax assets:
 
 
 
Net operating loss and other carryforwards
$
5,542.0

 
$
5,176.6

Property and equipment, net
2,089.7

 
1,971.7

Debt
966.5

 
1,469.8

Derivative instruments
156.4

 
55.2

Intangible assets
104.7

 
86.1

Share-based compensation
71.7

 
118.7

Other future deductible amounts
189.6

 
260.9

Deferred tax assets
9,120.6

 
9,139.0

Valuation allowance
(4,665.1
)
 
(4,664.5
)
Deferred tax assets, net of valuation allowance
4,455.5

 
4,474.5

Deferred tax liabilities:
 
 
 
Property and equipment, net
(939.5
)
 
(902.4
)
Intangible assets
(505.0
)
 
(664.0
)
Deferred revenue
(240.5
)
 
(254.8
)
Investments (including consolidated partnerships)
(130.3
)
 
(144.7
)
Derivative instruments
(1.6
)
 
(175.5
)
Other future taxable amounts
(124.6
)
 
(176.6
)
Deferred tax liabilities
(1,941.5
)
 
(2,318.0
)
Net deferred tax asset
$
2,514.0

 
$
2,156.5



Our deferred income tax valuation allowance increased $0.6 million in 2017. This increase reflects the net effect of (i) the effect of enacted tax law and rate changes, (ii) foreign currency translation adjustments, (iii) the net tax expense of $339.7 million, (iv) decreases associated with reductions in deferred tax assets and (v) other individually insignificant items.

Virgin Media had property and equipment on which future U.K. tax deductions can be claimed of $19.4 billion and $17.9 billion at December 31, 2017 and 2016, respectively. The maximum amount of these “capital allowances” that can be claimed in any one year is 18% of the remaining balance, after additions, disposals and prior claims. The tax effects of the excess of these capital allowances over the related financial reporting bases are included in the 2017 and 2016 deferred tax assets related to property and equipment, net, in the above table.

The significant components of our tax loss carryforwards and related tax assets at December 31, 2017 are as follows: 
Country
 
Tax loss
carryforward
 
Related
tax asset
 
Expiration
date
 
in millions
 
 
U.K.:
 
 
 
 
 
Amount attributable to capital losses
$
16,367.9

 
$
2,782.5

 
Indefinite
Amount attributable to net operating losses
1,304.2

 
221.7

 
Indefinite
The Netherlands
4,399.7

 
1,099.9

 
2018-2025
U.S.
2,326.2

 
312.4

 
2032-2037
Germany
1,410.4

 
228.3

 
Indefinite
Belgium
1,334.4

 
335.3

 
Indefinite
Luxembourg
1,062.9

 
276.5

 
Indefinite
Ireland
705.3

 
88.2

 
Indefinite
France
574.3

 
166.4

 
Indefinite
Other
278.6

 
30.8

 
Various
Total
$
29,763.9

 
$
5,542.0

 
 


Our tax loss carryforwards within each jurisdiction combine all companies’ tax losses (both capital and ordinary losses) in that jurisdiction, however, certain tax jurisdictions limit the ability to offset taxable income of a separate company or different tax group with the tax losses associated with another separate company or group. Further, tax jurisdictions restrict the type of taxable income that the above losses are able to offset. The majority of the tax losses shown in the above table are not expected to be realized, including certain losses that are limited in use due to change in control or same business tests.

We have taxable outside basis differences on certain investments in non-U.S. subsidiaries. For this purpose, the outside basis difference is any difference between the aggregate tax basis in the equity of a consolidated subsidiary and the corresponding amount of the subsidiary’s net equity, including cumulative translation adjustments, as determined for financial reporting purposes. This outside basis difference does not include unremitted earnings. At December 31, 2017, we have not provided deferred tax liabilities on an estimated $7.5 billion of cumulative temporary differences on the outside bases of our non-U.S. subsidiaries.

Through our subsidiaries, we maintain a presence in many countries. Many of these countries maintain highly complex tax regimes that differ significantly from the system of income taxation used in the U.K. and the U.S. We have accounted for the effect of these taxes based on what we believe is reasonably expected to apply to us and our subsidiaries based on tax laws currently in effect and reasonable interpretations of these laws. Because some jurisdictions do not have systems of taxation that are as well established as the system of income taxation used in the U.K., U.S. or tax regimes used in other major industrialized countries, it may be difficult to anticipate how other jurisdictions will tax our and our subsidiaries’ current and future operations.

While we have limited operations in the U.S., the 2017 U.S. Tax Act could have a material impact on our income tax expense. In addition to lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, the 2017 U.S. Tax Act contains significant changes to the U.S. income tax regime, including changes to the formation and use of net operating losses incurred after December 31, 2017, changes to the income tax deductibility of certain business expenses, including interest expense and compensation paid to certain executive officers, the imposition of taxes on a one-time deemed mandatory repatriation of earnings and profits of foreign corporations (the Mandatory Repatriation Tax) and a new tax on global intangible low-taxed income (the GILTI Tax).

With regard to the change in the corporate tax rate, we recorded the impacts of applying the new 21% tax rate to the net deferred tax assets and deferred tax liabilities associated with our U.S. operations during the fourth quarter of 2017. The impact of this change was not material.

The Mandatory Repatriation Tax requires that the aggregate post -1986 earnings and profits of our foreign corporations be included in our U.S. taxable income. The one-time repatriation of undistributed foreign earnings and profits is then taxed at a rate of 15.5% for cash earnings and 8% for non-cash earnings, both as defined in the 2017 U.S. Tax Act. Given the amount of information we are required to gather and analyze and the complexity involved in applying the new tax laws in our circumstances, we are currently unable to make a reasonable estimate of any Mandatory Repatriation Tax that we may ultimately incur. Accordingly, we have not yet recorded a Mandatory Repatriation Tax liability in our consolidated financial statements. If we ultimately conclude that we are responsible for a Mandatory Repatriation Tax, our effective tax rate will be negatively affected. Any such Mandatory Repatriation Tax could be material. Our evaluation of these amounts will be finalized during 2018.

The GILTI Tax will require our U.S. subsidiaries that are shareholders in foreign corporations to include in their taxable income for each year beginning after December 31, 2017, their pro rata share of global intangible low-taxed income. The GILTI Tax is calculated as the excess of the net foreign corporation income over a deemed return.
 
We and our subsidiaries file consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In connection with such reviews, disputes could arise with the taxing authorities over the interpretation or application of certain income tax rules related to our business in that tax jurisdiction. Such disputes may result in future tax and interest and penalty assessments by these taxing authorities. The ultimate resolution of tax contingencies will take place upon the earlier of (i) the settlement date with the applicable taxing authorities in either cash or agreement of income tax positions or (ii) the date when the tax authorities are statutorily prohibited from adjusting the company’s tax computations.

In general, tax returns filed by our company or our subsidiaries for years prior to 2008 are no longer subject to examination by tax authorities. Certain of our subsidiaries are currently involved in income tax examinations in various jurisdictions in which we operate, including Germany, the Netherlands, and the U.S. Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the U.S., we have received notices of adjustment from the Internal Revenue Service with respect to our 2010 and 2009 income tax returns, and have entered into the appeals process with respect to the 2010 and 2009 matters. While we believe that the ultimate resolution of these proposed adjustments will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.
 
The changes in our unrecognized tax benefits are summarized below: 
 
2017
 
2016
 
2015
 
in millions
 
 
 
 
 
 
Balance at January 1
$
347.1

 
$
606.3

 
$
513.5

Additions for tax positions of prior years
171.2

 
8.0

 
23.1

Reductions for tax positions of prior years
(35.6
)
 
(186.6
)
 
(42.2
)
Foreign currency translation
33.8

 
(12.0
)
 
(22.0
)
Additions based on tax positions related to the current year
15.6

 
23.5

 
142.3

Settlements with tax authorities
(3.6
)
 
(13.5
)
 
(0.1
)
Lapse of statute of limitations
—

 
(78.6
)
 
(8.3
)
Effects of business acquisitions
—

 
—

 
—

Balance at December 31
$
528.5

 
$
347.1

 
$
606.3



No assurance can be given that any of these tax benefits will be recognized or realized.

As of December 31, 2017, our unrecognized tax benefits included $317.3 million of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.

During 2018, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as expiration of statutes of limitation, could result in reductions to our unrecognized tax benefits related to tax positions taken as of December 31, 2017. The amount of any such reductions could range up to $125 million, all of which would have a positive impact on our effective tax rate. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during 2018. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during 2018.

During 2017, 2016 and 2015, the income tax benefit (expense) of our continuing operations includes net income tax benefit (expense) of ($6.7 million), $30.3 million and ($10.3 million), respectively, representing the net benefit (accrual) of interest and penalties during the period. Our other long-term liabilities include accrued interest and penalties of $38.2 million at December 31, 2017.